Man-made fibres and yarns were slotted under the 18% GST rate while fabrics were slotted under the 5% GST slab with a condition that no refund of input tax credit would be allowed at the fabric stage. This was creating a huge inverted duty problem for the synthetic sector and inflating the cost of synthetic products that already had serious threat from cheaper imports. Under the post-GST regime, with the abolition of 12.5% countervailing duty and 4% special additional duty, import has become cheaper. The industry has been pleading with the GST Council to reduce the MMF yarn GST rate from 18% to 12% to avoid the cost escalation of yarn and facilitate the powerloom sector to remain competitive.
In a press release, Mr. P. Nataraj, Chairman of the Southern India Mills Association (SIMA), has profusely thanked the Union Minister for Textiles and Information and Broadcasting, Ms. Smriti Zubin Irani, for the concerted efforts made to reduce the GST rate on the MMF filament yarn, and MMF spun yarn, including filament sewing thread, from 18% to 12%. He has also thanked the Union Finance Minister and the GST Council members for favourably considering the genuine demand made by the synthetic sector and announcing the reduced rate. The reduced GST rate would greatly benefit the spinning and powerloom sectors, improve global competitiveness and cloth the poor masses of the nation at an affordable cost.
The SIMA Chairman has also thanked the GST Council for giving a relief for the blockage in credit of exporters that affects the cash liquidity of exporters. He has hailed the announcement of processing of the refund cheques for July exports by October 10 and for August exports by October 18 and also the decision for refunding a notional amount for the remaining months and later adjust the amount in the E-Wallet while implementing it from April 1, 2018. This would resolve the problem of working capital blockage and benefit exporters. The suspension of the reverse charge mechanism till March 31, 2018, will benefit small businesses and substantially reduce the compliance costs.
He has also welcomed the announcement of easing the compliance burden of medium and small tax-payers and increasing the eligibility of the composition scheme from Rs. 75 lakhs to Rs. 1 crore.
The SIMA Chief is hopeful that the GST Council would soon consider refund of the accumulated input tax credit at the fabric stage, especially the processed fabrics, and also mandating the Duty Drawback Committee to recommend appropriate duty drawback rates and RoSL rates to sustain the export performance. The Government would hopefully extend the transitional provision of giving the pre-GST duty drawback and RoSL rates for another three months or till the new rates are announced.